Q1. Sam is a part-time engineer at Sealonk and he makes $1200 per week there. He also does

private tutoring after work, for which he makes $400 per week.

Sam's grandma makes the best chocolate chip cookies in the world. She gave him her secret

recipe and some baking tools, so Sam decides to quit private tutoring and start up a side

business making chocolate cookies. For every 20 boxes of cookies, Sam will need to spend $2

on ingredients.

1. What are the explicit costs of Sam's side business? Other than the explicit costs, describe

an additional opportunity cost of his side business. (1 marks)

The explicit costs of Sam's side business are ingredient, for every 20 boxes of cookies he need to spend $2 on ingredients. The additional opportunity cost of his side business is implicit cost. Sam had to spend time on making chocolate cookies, so the implicit cost is time.

2. If Sam can bake 200 boxes of cookies per week after work, explain what would be the

minimum price for each box for it to be worth it to start this side business? (2 marks)